Market participants agreed to extend improvements in the processing of over-the-counter credit derivatives to other asset classes after a US senator last week called for greater regulation to address systemic risks.

The meeting yesterday was the fourth between the Federal Reserve Bank of New York and market participants and the first to include buy-side clients and industry associations.

The Fed said that since September 2005, reforms have led to 91% of credit derivatives trades being confirmed electronically and an 86% reduction in the number of credit derivatives confirmations outstanding more than 30 days.

At the meeting, participants agreed to further increasing standardisation and automation of credit derivatives trade processing, to develop a central counterparty for credit default swaps and to extend infrastructure improvements to over-the-counter equity, interest rate, foreign exchange, and commodity derivatives, and to reduce the level of outstanding contracts through bilateral and multilateral netting.

Participants agreed to detail their next steps for addressing these priorities to regulators by July 31.

In a speech yesterday, Timothy Geithner, president and chief executive of the Federal Reserve Bank of New York, said: "These changes to the infrastructure will help improve the system's ability to manage the consequences of failure by a major institution. Making these changes will take time, but we expect to make meaningful progress over the next six months."

Geithner also said the Fed is in the process of encouraging a substantial increase in the resources held against the risk of default by a major market participant.

He said: "We have begun to review how to reduce the vulnerability of secured lending markets, including tri-party repo by reducing, in part, the scale of potentially illiquid assets financed at very short maturities."

Last week, US Senator Charles Schumer set his sights on the credit derivatives markets by calling for greater regulation to address systemic risks.

In a letter to US regulators, Schumer warned the unregulated credit derivatives market, with about $58 trillion (€37 trillion) in outstanding credit default swaps, is "capable of posing a devastating risk to the regulated financial system."